Expedia 2008 Annual Report Download - page 59

In 2008, net cash provided by operating activities decreased by $191 million primarily due to a decrease
in changes in operating assets and liabilities, including an increase in tax payments and faster invoice and
payment processing for our hotel suppliers in the current period. In 2007, net cash provided by operating
activities increased by $95 million primarily due to an increase in changes in operating assets and liabilities
and an increase in cash flows from operating income, partially offset by an increase in interest payments.
In 2008, cash used in investing activities increased by $680 million primarily due to a $479 million
increase in cash paid for acquisitions, including $93 million as a contingent payment for the financial
performance of a company we acquired during 2007, as well as the purchase of short-term investments of
$93 million by eLong and an increase in capital expenditures of $73 million. In 2007, cash used in investing
activities increased by $66 million primarily due to a $27 million increase in cash paid for acquisitions and a
$32 million increase in long-term investments and deposits mainly related to our 50% investment in a travel
company. These increases were offset by a decrease of $6 million in capital expenditures.
In February 2008, eLong announced approval by its board of directors of a share repurchase program of
up to $20 million. Executed purchases are classified as acquisitions in the investing section of our statements
of cash flows. As of November 25, 2008, eLong had executed approximately $14 million in purchases under
the repurchase program.
Cash provided by financing activities in 2008 primarily included $457 million of net borrowings of debt.
Cash used in financing activities in 2007 primarily included cash paid to acquire shares in the first and
third quarter tender offers pursuant to which we acquired 30 million tendered shares of our common stock at a
purchase price of $22.00 per share and 25 million tendered shares of our common stock at $29.00 per share,
for a total cost of $1.385 billion plus fees and expenses relating to the tender offers. In addition, we paid
withholding taxes for stock option exercises of $121 million on behalf of our Chairman and Senior Executive
in exchange for surrendering a portion of his vested shares which were concurrently cancelled. These were
offset in part by $585 million in net borrowings on the revolving credit facility used primarily to fund a
portion of the third quarter tender offer, $55 million in proceeds from stock option exercises and $96 million
in excess tax benefits on equity awards, of which approximately $92 million related to the excess tax benefit
associated with the stock options exercised by our Chairman and Senior Executive.
Cash provided by financing activities in 2006 was primarily due to the net proceeds of $495 million from
our senior notes issuance in 2006 and $35 million in proceeds from stock option exercises, partially offset by
$296 million of treasury stock activity primarily related to cash paid to acquire shares in the second and third
quarters pursuant to which we acquired in open market trades 20 million shares of our common stock at an
average per share price of $14.42 for a total cost of $288 million and the $230 million repayment of our
revolving credit facility, which was initially borrowed in 2005.
In June 2008, we privately placed $400 million of 8.5% senior unsecured notes due in July 2016 (the
“8.5% Notes”). The 8.5% Notes were issued at 98.572% of par resulting in a discount, which is being
amortized over their life. Interest is payable semi-annually in January and July of each year, beginning
January 1, 2009. We used the proceeds, net of the discount and issuance costs paid to date, of $392 million to
repay the then outstanding borrowings under our credit facility of $330 million with the remaining cash was
used for general corporate purposes.
In August 2006, we issued $500 million of 7.456% senior unsecured notes due in August 2018 (the
“7.456% Notes”) for net proceeds of $495 million. Interest is payable semi-annually in February and August
of each year, which began in February 2007. The 7.456% Notes are repayable in whole or in part on
August 15, 2013, at the option of the Note holders, and are redeemable in whole or in part at any time at our
option.
The effect of foreign exchange on our cash balances denominated in foreign currency in 2008 showed a
net decrease of $99 million primarily due to a sharp depreciation in foreign currencies during the second half
of 2008 compared with appreciating foreign currencies throughout 2007, and included a $21 million loss
related to euro cash holdings during the third quarter of 2008 to economically hedge the purchase price of an
acquisition. The effect of foreign exchange on our cash balances denominated in foreign currency in 2007
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